Ch. 8.1 Stocking Up

1. Ch. 8.1 Stocking Up

2. Corporation Is a company that is owned by the shareholders. It is open to the public to be invested in. The company then pays back their shareholders by performing better. Advantages to a corporation: • limits the company in liability, also you the shareholder • There are tax deferral benefits • Has rights just like a person!!!

3. Stocks Shares or stocks: represent ownership in a corporation. If the corporation is successful, the shareholder will get dividends. Dividends- payments made by a company to its shareholder. 2 options: • one can reinvest it; retained earnings • Or it can be paid to the shareholder; dividend

4. Stocks One can also make money through an increase market value in the stock. This is called a capital gain. On the other hand, if a company is not successful, you can lose money. Capital ____.

5. Bonds:

6. Bonds When a person buys a bond, they are lending money to a corporation. Face Value of a bond – is the original loan amount that appears on the bond. In return for you money you get 3 things: • The company promises to pay the entire face value back to you. • A maturity date, which the earliest date when the bond will be redeemed • A promise to pay interest at a specified interest rate

7. Bonds Corporate bonds – private companies issue bonds to raise money for expansion. If a company is not successful, they must eventually pay bonds before stockholders. Municipal Bonds – States, cities, counties, school districts, and other government bodies issue these to raise money.

8. Bonds U.S. Savings Bonds – they are payroll deductions taken by the Government which are backed by the Federal Reserve. One big advantage is that there is a sense of trust in the Government.

9. Mutual Funds Mutual Funds is a means of pooling funds with thousands of other people to acquire a wide variety of stocks, bonds, and other types of investments. This is good for small investors and people who do not have much knowledge in investment.

10. Mutual Funds Example: Instead of investing $1000 dollars in a particular corporation, you can buy in to a Mutual Fund and have small investments in several corporations, up to 100.

11. Newspaper Stock Listings 52-week • High and low are prices at which GrowCo traded during the previous 52 weeks. • After the name, is the annual per-share dividend of $1.10. • Yesterday’s high and low are next. Along with the closing price (last). • The change is the difference from previous day.

12. Sharpen Your Skills Ex: Jeff has $2200 in savings which he would like to invest in stocks. How many shares of Best Buy could he buy if it is selling for 39 3/8, or $33.375 per share? Disregard transactions costs and commissions. Solution: 2200/33.375 = 66.917603 65 shares

13. Sharpen Your Skills Bond prices that appear in the newspaper bond tables are somewhat misleading, since they show the true price divided by 10. So, a price of 104 ½ or 104.50 actually refers to a bond that has a market value price of $1045. How many corporate bonds could Jeff buy with $2200 from his savings?

15. What was the closing price for TemCont? • What was the highest price at which BlcInc traded? • How much did BxCo stock vary during trading? • How does BxCo’s closing price compare with its closing price for the previous trading session? • What was the closing price of BxCo at the end of the previous trading session? • What was the annual dividend pre share paid by BlcInc? • What would your annual dividend income from 100 shares of BlcInc? • Which companies closed at their high prices for the day? • What is the highest price at which Maldmer has traded in the 52 weeks? What is the lowest price?

16. Newspaper Listings • Which stock had the highest change from the day before? • Which stock had the lowest? • Which stock is the most expensive? • Which stocks has had the largest increases from a year ago? List three. • Name 3 stocks that have done poorly compared to a year ago. • Which stocks would you probably invest in? Why?